Headwinds could impact growth – BoB

SHARE | Wednesday, 28 June 2017 | By Kabelo Adamson

The projected 4.2 percent economic growth can be achieved albeit there are a number of downward risks that may undermine growth, Bank of Botswana (BoB) senior officials told the media on Tuesday. The executives, led by Governor Moses Pelaelo, warned that there are both downward and upward risks that may affect economic growth. Earlier this year, Finance and Economic Development minister Kenneth Matambo indicated that the domestic economy is expected to recover and record a growth of 2.9 percent for the year, and anticipated to reach 4,2 percent this year. With the year almost half way through, Pelaelo and his team believe this is achievable as indications are all pointing to a recovering economy which will mostly be supported by global performance which is itself encouraging. The domestic growth is expected to be supported by the anticipated slight improvement in the mining sector and positive growth prospects for the non-mining sectors such as the slow recovery of the global economy and falling commodity prices. Pelaelo said global output is projected to grow by 3.5 percent in 2017 compared to an estimated 3.1 percent in 2016 and by 3.6 percent in 2018, reflecting prospective improvement in performance in both advanced and emerging market economies. “However, uncertainty surrounding global trade policy and openness, inward-looking policies as well as moderation of growth in China, could adversely affect the medium-term growth prospects,” said Pelaelo.

Regionally, he said the recent downgrading of South Africa’s credit rating for foreign currency debt to sub-investment grade could undermine growth by constraining private investment and household consumption. Potential negative spillovers into Botswana include higher inflation, lower exports and SACU revenue, although the risks are considered to be moderate, overall according to Pelaelo. SACU is one the most important revenue earners for government and during the past year Botswana’s share from it stood at R20.039 billion (P15. 818) compared to R19.276 (P15.691) in 2014/15, according to latest figures from Botswana Unified Revenue Service (BURS). Meanwhile the Monetary Policy Committee has decided to maintain the Bank Rate at 5.5 percent with the last adjustment made in August last year. The central bank officials said this is meant to spur economic activity as lenders are also expected to align their lending rates to the Bank Rate.